G7 Supports ISSB
The leaders of the world’s largest economies (the G7) met in Hiroshima, Japan, last week and threw their considerable weight behind the new International Sustainability Standards Board (ISSB). The move supports the commitment to the Paris Climate Accord, which was strongly reaffirmed by these countries representing about 44 percent of the global economy (not including the European Union).??
The official communique stated: “We support the International Sustainability Standards Board (ISSB) finalizing the standards for general reporting on sustainability and for climate-related disclosures and working toward achieving globally interoperable sustainability disclosure frameworks .”?
In addition to backing the ISSB standards, the communique announced funding for climate initiatives in developing nations and a moratorium on new coal plants. It also reaffirmed the agreements from last month’s G7 climate and energy ministers meeting, covered in a previous edition .
Scope 3 Reporting Required
With the G7 backing, it is clear that the ISSB will become the global standard for greenhouse gas emissions reporting. Because these new standards, expected to be finalized in June, include “Scope 3 emissions” (indirect emissions that occur within a company's value chain, when material), there’s little doubt that Scope 3 reporting - even in the US - will be required by most companies.?
Despite the progress on climate, the meeting outcome was criticized for allowing the construction of new liquefied natural gas (LNG) infrastructure. Tracy Carty of Greenpeace International said G7 members' support of LNG infrastructure “is a blunt denial of the climate emergency .”
EU May Scale Back Sustainability Reporting
While the G7 supported uniform climate reporting, news broke that the European Commission may scale back its new ESG reporting rules . The new Corporate Sustainability Reporting Directive (CSRD) was to require reporting for all of the new European Sustainability Reporting Standards (ESRS) as soon as next year.? According to recent reports, this is set to be scrapped.?
If approved, companies could avoid reporting on sustainability indicators if they can show they are not material to their business. In addition, the phase-in of the requirements will be stretched out, and some disclosure requirements will be relaxed. Axelle Blanchard , at NGO Frank Bold, said the expected changes are “disappointing” and that “the ambition is not there anymore.”
Brazil’s Climate Turnaround
After years of neglect under the Bolsanaro regime, Brazil’s new president Lula wants to restore the country’s leadership on climate change and protection of the Amazon rainforest.??
Deforestation in the Amazon dropped by 68% in April compared to last year , the first drop in Lula’s presidency. Experts say it is too soon to say if this is a downward trend, but Lula is eager to meet his pledge of ending deforestation in 2030. Daniel E Silva , of WWF-Brasil. "The environmental agenda has been resumed, but we know time is necessary for the results to be reaped ." Additionally, Lula plans a more ambitious ‘Nationally Determined Contribution’ ahead of this year’s COP .?
However, like all leaders, Brazil’s new president must balance environmental protection with economic growth. Lula went against his environment agency to support oil and gas exploration in the Amazon Basin, saying he finds it “difficult” to imagine how oil exploration would cause ecological damage.??
Brazil’s eco-turnaround is attracting new funding from the UK, which donated 80 million pounds to fight Amazon deforestation earlier this month and, more recently, 7.3 million pounds for an experiment called AmazonFACE . The experiment will spray mists of carbon dioxide from towers in the rainforest to assess how increased CO2 levels affect tropical forests' ability to sequester carbon.?
The Good and Bad News for Climate Disasters
While the Canadian province of Alberta faced a second month of cataclysmic wildfires, a new study revealed that a fifth of the world’s population will live with dangerous heat levels by 2100. ?
There was some good news too. Thanks to better warnings and responses, fewer people are dying from extreme weather events than ever . These were the findings of the updated Atlas of Mortality and Economic Losses from Weather, Climate, and Water Extremes from the World Meteorological Organization (WMO). WMO Secretary-General Petteri Taalas pointed to last week’s Cyclone Mocha, saying, "Thanks to early warnings and disaster management…catastrophic mortality rates are now thankfully history ."??
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Those early warning systems are set to be improved further with the global release of Google's AI-enabled flood forecasting platform . The flood predictions system can warn people in now over 60 countries of incoming floods up to seven days in advance.?
Saving the Colorado River
The Colorado River is the lifeblood of the American Southwest, providing drinking water to 40 million people and irrigating 5.5 million acres of farmland . However, the river and its reservoirs have been steadily depleted due to drought and overuse.?
Thankfully, California, Nevada, and Arizona reached a historic agreement to reduce water use from the river. The deal, supported by $1.2 billion in federal funds, will reduce water use by 3 million acre-feet by 2026 - a family of four uses around one acre-foot of water per year . The Biden administration announced further steps to protect the waterway with funding from the Inflation Reduction Act that will save up to 393,000 acre-feet of water from Lake Mead, Colorado's largest reservoir.?
NZIA Faltering
Allianz and AXA became the most recent insurance companies to leave the Net Zero Insurers Alliance (NZIA) this week, calling into question the future of the industry group. These defections, plus Swiss Re leaving earlier in the week , means that at least five of the eight original NZIA members have left the group. AXA, whose Chief Risk Officer Renaud Guidée has been chairing the NZIA, said after leaving that AXA would "continue its individual sustainability journey ."
The group has faced pressure from conservative state and federal legislators threatening antitrust laws. The group will meet to determine how they will continue, if at all. Lloyd's of London boss John Neal called for a change in the group's charter, saying, “NZIA needs to have another look at what their objectives are or the alliance will fall apart ."
Storm of Activism
After the ClientEarth case against Shell was dismissed by the court , protestors stormed their annual general meeting. The Shell CEO had to be shielded by security as protestors rushed the stage when 80% of the shareholders voted to support their current climate strategy. Shell's new CEO Wael Sawan said, "The silent majority is being very clear with us as to their expectations ... (to) find a balanced transition ."
Mutiny at COP28?
Representatives from the US Congress and the EU parliament have banded together to request the removal of oil executive Sultan Al Jaber as president of this year’s COP28. More than 130 lawmakers sent an open letter to world leaders claiming fossil fuel companies will have an “undue influence” over the negotiations at COP 28 in the United Arab Emirates later this year.
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Wanted to share a dialogue on this week's edition I had with Derek Young: Derek: How do you reconcile the first two articles in your newsletter this week? One shows a global push towards more comprehensive climate disclosure while the other suggests a rollback of the one of the most highly anticipated and impactful regulations in the world. Where do you feel that leaves things? Me: I would parse it this way.? The EU CSRD/ESRS may have overreached by forcing 50K companies to report on hundreds of ESG metrics in their financials - many of which are not financially material. The ISSB however, is focused solely on financially material ESG disclosure and only on climate (for now).?This is a more pragmatic approach designed to fit within the paradigm of capital market regulation and thus is gaining momentum.? What are your views?
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